By Steve│Nonprofit Quarterly
What does impact investing—that is, investing with social benefit in mind—demand of investors? Many in the field have long held it demands virtually nothing, that an investor can have a social impact without sacrificing a penny of their own. As one firm states, investors “do not have to choose between doing good—i.e. generate social or environmental return—or doing well—that is: make a financial return.”
This analysis, offered by Triodos, a firm with over $6 billion (€5.9 billion) in assets under management and a 30-year track record, isn’t wrong per se. There are indeed many investments where social or environmental goals don’t harm earnings (and, arguably, even improve earnings). An investment portfolio that limits energy investments to renewables, for example, may well outperform a portfolio that includes fossil fuel firms; holding on to fossil fuel stocks is arguably riskier.
But if the goal is to build a solidarity economy or foster a structural shift in the economy so that US business owners of color have the same ability to finance and develop thriving businesses as White business owners, then investor willingness to sacrifice some degree of financial return for social impact is required. That is the central conclusion of a new report released last December by Boston Impact Initiative, a nonprofit place-based investor in the Boston area and a promoter of the field nationwide.
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